Grenier’s model of growth considers
some of the issues a business might face as it grows in scale.
The model can help managers predict and plan for different issues as the business grows.
What are the 6 phases of growth according to Grenier?
creativity, direction, delegation, coordination, collaboration, alliances
Phase 1 - creativity
- Informal business practices
- Business driven by creativity and all employees understand the impact they have on the business
- Rules are not clear.
Phase 2 - direction
- Leadership crisis - as the business grows some tasks may get missed or jobs will be duplicated.
- At some point, clear direction is needed along with leadership.
Phase 3 - delegation
- Autonomy crisis - as the business grows, there is a need for more delegation as managers desire autonomy to make their own decisions and respond to localised issues.
Phase 4 - coordination
- Crisis of control - as the business continues to grow, directors may feel that they are losing control of some aspects of the business and they worry about strategic direction.
Phase 5 - collaboration
- Red tape crisis - as the leaders put in place systems and mechanisms of control, bureaucracy leads to
inefficiencies and a distraction from the core business activities.
Phase 6 - alliances
- Growth crisis - as the business reaches its potential for internal growth it may look for growth through external collaboration. This brings with it a new set of dilemmas.
Grenier’s model demonstrates the
conflicting forces managers will face as a business grows. Mainly there are fluctuations between controlling the business and providing autonomy to maximise employee potential and adapt to specific needs.
Impact of growth on marketing
As businesses grow they will launch new products and move into new markets. Marketing must ensure that the business understands the needs of its new customers and effectively promotes the new ventures.
Impact of growth on operations
- Operations will look to maximise capacity and put in place systems to manage increased production and sales
- Operations may also need to find additional capacity to cope with expansion.
Impact of growth on finance
- As businesses grow cash flow is essential.
- Finance should identify the capital investment required to finance growth and find suitable sources of financing.
Impact of growth on HR
As businesses grow, so will the workforce.
HR will recruit and train the new employees.
4 methods of external growth
- merger
- takeover
- joint venture
- franchise
What is a takeover?
also known as acquisition, which may be hostile or voluntary
- One business will acquire another along with its assets
- If hostile, the takeover is riskier for the acquiring business.
What is joint venture?
- two businesses come together to work on a particular project such as a product launch.
- Information and expertise will be shared but the businesses will remain separate, removing the problems of integrating two businesses.
What is a merger?
- two businesses come together for mutual benefit
- This may be to share strengths or with the purpose of business survival
- The business will seek synergies through the merger.
What is a franchise?
growth through selling the rights of the business (name, product, assets) to a third party (franchisee) who will run the business independently following the business model. The franchisee will pay a % of revenue. Requires little effort or investment but requires close monitoring.
Where growth occurs through a takeover/acquisition there is more likely to be
resistance from employees, customers and shareholders if they believe their own interests may be damaged - such as loss of jobs.
Level of control of methods of growth from most control to least
takeover
franchise
merger
joint venture
A number of options are available to a business looking to
externally grow through a takeover, merger or joint venture
Types of growth:
- backwards vertical
- horizontal
- forwards vertical
- conglomerate
What is horizontal growth?
merging with a business at the same level of the supply chain e.g. another
Christmas tree wholesaler
What is forwards vertical growth?
taking over a customer e.g. a retailer that sells Christmas trees
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